Hong Kong - Hong Kong stocks shot up by nearly 13 per cent Thursday to record their second double-digit rise of the week as a cut in interest rates boosted confidence in the market.

The blue-chip Hang Seng index gained 1,627.78 points, or 12.82 per cent, to close the day at 14,329.85 after a 50 point overnight cut in interest rates in the US. Turnover was 75.1 billion Hong Kong dollars (9.68 billion US dollars).

The US rate cut was followed by an announcement Thursday morning by the Hong Kong Monetary Authority that it would follow the move, cutting its base interest rates by 50 points to 1.5 per cent.

The authority's chief executive, Joseph Yam, said he hoped the move would result in a reduction in local bank lending rates and a freeing up of credit.

This week has been one of the most volatile in the Hang Seng's history with stocks sinking by 12.7 per cent on Monday only to bounce back by 14.35 per cent Tuesday when it clocked its biggest one-day rally for 11 years.

Analysts were cautious about Thursday's rise in the index, the third consecutive day in which stocks have risen, saying more pain might be ahead for investors as the global economic crisis continues.

Hong Kong's financial secretary John Tsang told legislators earlier Thursday there were "tough times ahead" for the Hong Kong economy, warning of job cuts, low growth and a possible recession.

He predicted further financial turmoil with the credit crunch likely to continue to impact on the city of 6.9 million in the short-term.

The Hang Seng Index has been hit particularly hard in the recent economic slump, shedding more than half of its value since it peaked at just below 32,000 in October last year. (dpa)